Hills Bancorporation

Hills Bancorporation is the holding company for Hills Bank and Trust Company and is headquartered in Hills, Iowa.

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Corporate Governance

HILLS BANCORPORATION & HILLS BANK and TRUST COMPANY

MARCH 22, 2004

Employee, Officer, Director and/or Shareholder

Complaint Procedure for Accounting and Auditing Matters

Any employee, officer, director and/or shareholder of the Company may submit a good faith complaint regarding accounting or auditing matters to the management of the Company without fear of dismissal or retaliation of any kind. The Company is committed to achieving compliance with all applicable securities laws and regulations, accounting standards, accounting controls and audit practices. The Company's Audit Committee (comprised of three independent members of the Board of Directors) will oversee treatment of any employee, officer, director and/or shareholder concern in this area.
In order to facilitate the reporting of any employee, officer, director and/or shareholder complaint, the Company's Audit Committee has established the following procedures for (1) the receipt, retention and treatment of complaints regarding accounting, internal accounting controls, or auditing matters ("accounting matters") and (2) the confidential, anonymous submission by any employee, officer, director and/or shareholder with a concern regarding questionable accounting or auditing matters.

Receipt of Complaints

• Employees, officers, directors and/or shareholders with concerns regarding accounting matters may report their complaints or concerns on a confidential or anonymous basis to the Audit Committee of the Company through TeleSentry, an independent third party, using a 24 hour hotline:

• These procedures relate to any employee, officer, director and/or shareholder complaint relating to any questionable accounting or auditing matters.

• Upon receipt of a complaint, the independent third party will provide the Audit Committee with the complaint information.
• Complaints relating to accounting matters will be reviewed under Audit Committee direction and oversight by the Counsel, Internal Audit or such other persons as the Audit Committee determines to be appropriate. Confidentiality will be maintained to the fullest extent possible, consistent with the need to conduct an adequate review.
• Prompt and appropriate corrective action will be taken when and as warranted in the judgment of the Audit Committee.
• The Company will not discharge, demote, suspend, threaten, harass or in any manner discriminate against any employee, officer, director and/or shareholder in the terms and conditions of employment, responsibilities or services based upon any lawful actions of such employee, officer, director and/or shareholder with respect to good faith reporting of complaints regarding accounting matters or otherwise as specified in Section 806 of the Sarbanes-Oxley Act of 2002.

• The Internal Auditor will maintain a log of all complaints, tracking their receipt, investigation and resolution and shall prepare a periodic summary report thereof for the Audit Committee.

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